English High Court considers if it can grant a freezing order over a third party outside its jurisdiction to support enforcement

In Commercial Bank of Dubai PC and others v Al Sari and others [2024], the High Court considered the circumstances in which the court will grant a freezing order relating to the enforcement of a judgment against a third party.

The court was satisfied that the third party had assets which could potentially be enforced against – but the real issue was around the fact that the third party was outside the jurisdiction.

Serving proceedings on a defendant outside of England and Wales

A claimant seeking to serve proceedings on a defendant outside of England and Wales must generally apply to the court for permission pursuant to rule 6.36 of the Civil Procedure Rules. On such an application, the claimant must persuade the court that:

• there is a good arguable case that the claim falls within one of the jurisdictional gateways set out in Practice Direction 6B.3.1;
• there is a serious issue to be tried on the merits of the claim; and
• England is clearly the most appropriate forum for the trial of the action.

The jurisdictional gateway relied on here was the "necessary or proper party" gateway, which applies where a claim is or will be served against an anchor defendant, there is a real issue between the claimant and anchor defendant, and the anchor defendant is a necessary or proper party to the claim or gateway 3".

The facts

In this case, the claimant obtained a judgment in England and Wales against the first to third defendants to enforce a judgment obtained against them in the courts of Sharjah, and obtained a worldwide freezing order against the three to secure the judgment. Suspecting that the 10^th defendant may hold assets against which the claimant could enforce, the claimant sought a further worldwide freezing order against the 10^th defendant as a non-cause of action defendant, relying on gateway 3.  This application for a freezing order was based on the potential to enforce the judgment against defendants one to three against the 10^th defendant; it was not based on the substantive claims made against the 10^th defendant in the proceedings.

For present purposes, it is sufficient to note that the court accepted that the 10^th defendant  was holding assets against which the Sharjah judgment could be enforced. It was, therefore, necessary for the court to consider whether the application for a freezing order could be served out of the jurisdiction. This is a problem that the courts regularly grapple with and the basis for jurisdiction is often argued in different ways.

Decision

In his judgment, Foxton J held, in relation to gateway 3, that:

• Gateway 3 requires substantive proceedings to have been commenced against the anchor defendant that could, in principle, include enforcement proceedings.
• There is no requirement for the claim brought against the non-cause of action defendant to be a substantive claim, and procedural relief could therefore be sought from the non-cause of action defendant via gateway 3 (where the non-cause of action defendant is a necessary and proper party to that relief).
• There must be a live substantive or procedural issue between the claimant and the anchor defendant which also arises between the claimant and the non-cause of action defendant. The absence of such a common issue would weigh strongly against permission being granted for procedural relief.
• There must be a common factual enquiry involving the anchor defendant and the non-cause of action defendant.

Mr Justice Foxton J held that gateway 3 did not apply, and the court refused permission for the claimant to serve out of the jurisdiction.  Among other things, there were no live substantive or procedural issues against the first three defendants to which the 10th defendant was a necessary and proper party to – there being no indication that first three would in fact engage with the post-judgment phase – and the real purpose of the application was considered to be the disclosure of assets, rather than the resolution of some live issue or common factual enquiry.

Osborne Clarke's comment

This judgment is significant in scoping the circumstances in which the "necessary or proper party" gateway may be used to serve freezing orders out of the jurisdiction. This issue has been addressed in a number of judgments in the past but Mr Justice Foxton's analysis will undoubtedly be given considerable weight in future cases. His comment on the fact that procedural issues (rather than substantive issues) may be sufficient for the purposes of this gateway are potentially quite significant.

Furthermore, the judge's own reference to another potential line of argument (based on gateway 20, which relates to claims brought under statutory provisions) is likely to be seized upon by ambitious practitioners in the future.  This issue was not considered in the judgment as it was not a ground on which permission to serve out of the jurisdiction had been granted in this case.

The main point to be taken from the judgment is that the court does not have unlimited discretion to use gateway 3 to grant freezing orders against non-cause of action defendants, even where they are a defendant in the main proceedings. It will remain necessary for a claimant to show that a non-cause of action defendant is a necessary or proper party to live and relevant proceedings against the anchor defendant.